Pay off in full or monthly to improve credit rating?

Belloni

Hi all,

Some time ago I got a credit card out to build my credit report up as it was quite poor. Then unfortunately lost my job not long after so couldn't afford the repayments.

Now i'm back on my feet with a job etc, i'm paying off £20 a month to it now, would it be better, for my credit rating to continue paying it off monthly or just to finish off the lump sum now that I can afford to?

john1002

Have you defaulted on the card or just have late markers, best advice would be to get your statuary credit files from all three agencys and then see what the situation is, also depending on the balance £20 does not seem a lot a month to cover the high interest most credit builder cards charge. Depends on balance I know.

Come back when you know your credit profile now and then we should be able to help.

john

Belloni

Just have late markers I'm sure, the balance left is £170 now.

YorkshireBoy

Belloni wrote: »

would it be better, for my credit rating to continue paying it off monthly or just to finish off the lump sum now that I can afford to?

It's not necessary to pay (in the form of maintaining a revolving interest accruing balance) to 'buy' or improve a credit rating.

Pay it off, and continue to make small (essential) monthly purchases, paying off in full each month of course.

Over time, this will lessen (though just how much is anyone's guess) the effect of the late payment markers.

Belloni

Ok so just use it on petrol for example and set it to automatically pay off in full every month.

guesswho2000

Belloni wrote: »

Ok so just use it on petrol for example and set it to automatically pay off in full every month.

Yes, this will show that the account is being used regularly and managed properly, having the effect of improving your credit file.

Gromitt

Belloni wrote: »

Ok so just use it on petrol for example and set it to automatically pay off in full every month.

only do this if you know your current account will have sufficient funds to pay off your statement in full every month. If there's a chance you will not have sufficient funds then better to DD the minimum and faster payment the rest.

The way I do it is pay off the statement on the day I receive it, but ignore the pence, and then the DD takes £5 putting me in credit for the next month. Repeat each month.

guesswho2000

Gromitt wrote: »

only do this if you know your current account will have sufficient funds to pay off your statement in full every month. If there's a chance you will not have sufficient funds then better to DD the minimum and faster payment the rest.

The way I do it is pay off the statement on the day I receive it, but ignore the pence, and then the DD takes £5 putting me in credit for the next month. Repeat each month.

Be careful with this, as some cards reduce the DD amount if you make a mid term payment - if they do this, and you end up leaving 23p on your balance unpaid or whatever, you'll be charged interest on your entire balance for that month.

It won't hurt your credit file, as you'll have made the contractual payment, but it would cost you money

B19JON

is it better to let the DD be taken or pay using internet banking?

Gromitt

guesswho2000 wrote: »

Be careful with this, as some cards reduce the DD amount if you make a mid term payment - if they do this, and you end up leaving 23p on your balance unpaid or whatever, you'll be charged interest on your entire balance for that month.

So your saying that if the balance was £10.39, the minimum payment was £5, and I made a payment of £10 after the statement date, they wouldn't process a DD for neither £5 or 39p and then charge interest? Seems a strange way of doing it and none of my cards have ever done this. Once I've receive the statement saying "DD of £x will be taken on y", it didn't matter what payments you made.

zerog

Gromitt wrote: »

So your saying that if the balance was £10.39, the minimum payment was £5, and I made a payment of £10 after the statement date, they wouldn't process a DD for neither £5 or 39p and then charge interest? Seems a strange way of doing it and none of my cards have ever done this. Once I've receive the statement saying "DD of £x will be taken on y", it didn't matter what payments you made.

It depends. AFAIK: HSBC, Santander, Nationwide and Lloyds, if you have a DD set to min or full payment and have already paid the min/full, will reduce the DD by the amount you've paid (which could be to £0) - as long as you give them 3 days to recalculate the DD.

Tesco will always take a min payment DD whether you've paid anything else or not. Not sure what happens if you've paid in full.

But if you set a DD for £5 a month regardless of min payments, then I suppose it will always be taken. However, if your remaining balance is less than £5, some banks will take £5 anyway giving you a small positive balance, and some will only take the remaining balance.